Info-tech

Reliance Jio dials D for Disruption

Our Bureau Mumbai | Updated on January 16, 2018 Published on September 01, 2016

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In a move that will disrupt the Indian telecom sector, Mukesh Ambani’s telecom company Reliance Jio on Thursday said it will start offering all domestic voice calls for free.

The operator, which will give new connections from September 5 onwards, also launched data tariff plans that are about 30 per cent lower than the rates offered by incumbent operators.

Announcing the tariff plans, Mukesh Ambani, Chairman, Reliance Industries Ltd, said, “The era of paying for voice calls is ending. No Jio customer will ever have to pay for voice calls again.”

“Our second principle is data must be affordable. I believe that these are the absolute lowest data rates anywhere in the world,” he added.

Tariff plans

RJio has announced 10 tariff plans starting from ₹19 a day for 100 MB data to ₹4,999 for 75 GB data. All tariff plans offer free voice calling, including STD and roaming.

According to Crisil Research estimates, subscribers’ monthly bill could come down by 50-60 per cent if they opt for RJio plans. Consumers will, however, need a 4G-enabled smartphones to avail themselves of the service. To make handsets more affordable, Reliance has launched a device at ₹2,999 under the LYF brand.

Analysts said this could be one of the most defining moments in India’s telecom sector. The biggest impact will be on data tariffs, which are expected to come down from the current average of ₹250 per GB to ₹50 per GB. This, in turn, will quicken the pace of broadband adoption, just like voice telephony picked up after incoming calls were made free in 2003. The average data usage per subscriber in India is 400 MB currently, and RJio’s ₹499 plan offers 10 times this quantum to subscribers.

“With the launch of RJio, data consumption patterns will not only change, but also move to altogether new levels. This will definitely disrupt consumer behaviour and give the masses a true feel of Digital India,” said Anand Agarwal, CEO, Sterlite Technologies.

The drop in tariffs will, however, put incumbent operators under pressure, triggering a further consolidation in the sector. Voice calls currently account for close to three-quarters of industry revenue.

“RJio’s pricing is not just highly competitive, it also challenges the prevalent tariff structures. This could hurt the voice tariffs and average revenue per user of existing operators and push them to match the pricing, in a bid to protect their market share,” said Tanu Sharma, Associate Director – Large Corporates, India Ratings & Research.

Airtel, Idea shares slump

Post RJio’s launch, share price of Airtel and Idea tanked 9 per cent and 11 per cent intraday, with the latter even touching a fresh 52-week low level of ₹83.1 on the National Stock Exchange.

Incumbent players have been tweaking their data plans over the past few weeks and are expected to announce their counter to RJio’s offensive soon. While this is good news for consumers, incumbent operators could see erosion in profitability.

“The telecom sector is currently reeling under financial stress, high debt burden and a slowdown in revenue growth. Further decline in data tariffs may impact operators’ profitability and sustainability. It may impact the outcome of the upcoming spectrum auction critical for the Digital India vision,” said Prashant Singhal, Global Telecommunication Leader, EY.

Correction

The current average data tariff is Rs 250 per GB, not Rs 250 per MB, as an earlier version incorrectly said. The average tariff will drop to Rs 50 per GB, not Rs 50 per MB. The news report has been modified to correct the errors.

Published on September 01, 2016
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